BOK expands inflation target band for 2010-2012

By Kim Soo-yeon
SEOUL, Nov. 26 (Yonhap) -- South Korea's central bank on Thursday set the median
inflation target at 3 percent with a broader permissible band for three years
from 2010 in a bid to manage its monetary policy flexibly and better cope with
economic uncertainties.
The policy-setting Monetary Policy Committee at the Bank of Korea (BOK) decided
earlier in the day that the annual inflation target for the 2010-2012 period will
have a margin of plus or minus 1 percentage point.
The BOK has sought to keep consumer inflation between 2.5 and 3.5 percent from
2007 to 2009.
The expansion of the range came as despite signs of an economic recovery,
uncertainties surrounding the global economy still persist. The government and
the central bank have cast cautious outlooks for the economy.
As the global economy has begun to emerge from the slump, ample liquidity
stemming from aggressive rate cuts and rising raw material prices is feared to
put upward pressure on consumer inflation down the road.
The decision comes as debate over when the BOK should begin to shift into a
tightening stance has grown. The expansion of the band is widely expected to
lessen the burden for the BOK when weighing the timing of a rate hike, analysts
say.
The BOK froze the key interest rate at a record low of 2 percent in November for
the ninth straight month. It slashed the rate by a total of 3.25 percentage
points between October 2008 and February.
sooyeon@yna.co.kr
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